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The Bottom Has Fallen Out of Chinese Stocks

China’s stock markets—all of them—continue their collapse.

In what is now labelled a “bear market” by the Western financial news media, stocks in China are on what appears to be a race toward 2014 lows, even after China’s central bank’s weekend interest rate cut.

Today’s downtrend could very possibly be the market fearing an inevitable Greek exit from the European Union, but even more so it is mainly due to a much needed (and overdue) market correction.

Stocks in China have been on a tear since around November 2014. The Shanghai composite went from approximately 2,400 to a peak of 5,166 in June 2015. In a similar time frame, the Shenzhen composite went from approximately 1,360 to a peak of 3,140, and the ChiNext price index went from approximately 1,520 to a peak of 3,982.

As of today, the indices have lost over 20% of their market value, and things could turn even bloodier.

Volume appeared to be a bit more tempered today, but it was obviously still there with its most dramatic showing during the opening frame.

And this is just the bad news.

The ugly is that Chinese stocks have not fallen this much in 19 years.

The good news, though, is that a downward spiral creates a buying opportunity for more prudent investors. Although, this could wipe out more than a few stock speculators, and may even create weeks or months of market stagnation, sooner or later fair market value will be found, market forces will have prevailed, and speculators will slowly come back to hopefully take another swing.

And if normal market activity is not good enough for the Chinese government, they will probably just dip into their massive foreign reserves and throw money at the market, and by that time high-frequency trading (HFT) will have been set up and then they can just rig the markets like in the United States.

In any case, grab some popcorn because this one is certainly going to be something to watch.

  • big in japan

    this pic is the only good thing to come out of the chinese market here recently …!

    • DLee

      Second that!